Which institutional investors drive corporate sustainability?

Many institutional investors publicly commit to some form of responsible investment. This raises concerns about the credibility of such claims. We use participation in collaborative engagements to identify “Leaders”, i.e., institutional investors that are truly committed to improving firms’ sustainability outcomes. Despite owning only 2.2% of the average firm, Leaders alone explain the positive relationship between institutional ownership and firms’ environmental and social performance. In line with  committed owners facilitating corporate change, engagement campaigns are successful only when firms are substantially owned by Leaders. We also find that these firms are less at risk of experiencing negative incidents.